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Copy of Supply and Demand

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Matthew Young

on 28 September 2017

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Transcript of Copy of Supply and Demand

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Sup~ply
Demand
Supply
The quantities sellers are willing and able to produce or sell at various prices. The amount of good that is available to buy.
De~mand
Buyers/Consumers = DEMAND
Sellers/Producers = SUPPLY

Supply Schedule (Hamburgers)
Price
$ 8
$ 6
$ 5
$ 4
$ 3
$ 2
$ 1
Quantity
20
17
14
12
8
5
2
Price
10
8
6
4
2
2 6 8 12 16 20 Quantity
Supply Curve
Supply and demand (a market) exists because we have Voluntary Exchange>>>>>
Shif
T
ers
Government
R
egulations
Marginal
C
osts
As the Price goes up the Quantity Supplied goes up.
Two types of changes to the supply:
A change in Quantity Supplied:

A change at a certain price

This would be a simple movement along the curve.
Quantity of Supply Change
Price
Quantity
P2
P1
Q1
Q2
An increase in Price results in an increase in Quantity Supplied
P
S
A Shift in supply:

The actual supply curve will "shift" because there has been a change in supply at every price
Price
Quantity
Change in Supply (shift of the curve)
There is a different quantity supplied at every Price
S1
S2
C
O
S

E
R
Price of
O
ther goods that
could be produced
# of
S
ellers
T
echnology
E
xpectations
C
osts
O
ther goods
S
ellers
T
echnology
E
xpectations
R
egulations
Subsidy
Monetary assistance granted by the government to a person or a group in support of an enterprise regarded as being in the public's interest

Taxes, tariffs and laws
Shift
E
rs

C
R
I
M

Demand
:

Quantities of a certain good or service consumers are willing and able to buy at various prices at a certain time.
Demand Schedule (Hamburgers)
Price
$ 8
$ 6
$ 5
$ 4
$ 3
$ 2
$ 1
Quantity
2
5
8
12
14
17
20
2 6 8 12 16 20 Quantity
Demand Curve
Price
10
8
6
4
2
Price
10
8
6
4
2
Law of Demand:
As Price goes up, Quantity Demanded goes down.
Why does a demand curve slope
DOWNWARD
???
Buying Power
Reasons:
Substitution Effect:

Buyers will substitute a lower priced good or service for a similar higher priced good or service.
Buying Power :

(Income Effect) The greater the price, the less your income can buy.
Diminishing Marginal Utility:

the point reached when an additional unit of a product consumed is less satisfying then the one before it.
Two types of changes to the demand:
1. A change in Quantity Demanded:
Price Effect-This would be a simple movement along the curve. A change at a certain price.
Price
Quantity
P2
P1
Q1
Q2
An increase in Price results in an decrease in Quantity Demanded
P
D
2. A Shift in demand:
A change at EVERY price.
The actual demand curve will move because there has been a change in demand
Price
Quantity
Change in Demand (shift of the curve)
There is a different quantity demanded at every price
D1
D2
C
onsumer Tastes
trends and fashions that are highly desirable to the consumer.
Price of
R
elated Goods
Complementary Goods: A product often times used with other goods
Substitute Goods: If two items satisfy the same needs, and the price of one good rises, then people will buy more of the lower priced items.
If the price of one item drops, then people will buy more of that product. The other items that goes with it will increase in sales because when you buy the one item, you usually buy the other.
I
ncome
Inferior Goods: consumption decreases when the available income increases. For example, used books and instant noodles: the more income you have the less used books and instant noodles you buy.
Normal (superior) good is the most common type of good or service. A good or service is normal when its consumption increases with an increase in income. Example: clothes or toys, when your income increases you will buy more clothes or toys.
M
arket Size
# of buyers in the market
More buyers in the market leads to an increase in demand
Fewer buyers in the market leads to a decrease in demand
E
xpectations
C
onsumer tastes
Price of

R
elated goods
I
ncome
M
arket size
E
xpectations
Diminishing Personal Value:

We value things less as the price of that item increases.
Could also be negative publicity...
Left is less!
Positive promotion of a good or service
Left is LESS!!
Market Demand:
The sum of the individuals' demands in a given market
Consumers sometimes predict that the price or the availability of a product is likely to change in the future
Technological improvements help reduce production cost and increase profit, thus stimulate higher supply
If producers expect future price to be higher, they will try to hold on to their inventories and offer the products to the buyers in the future, thus they can capture the higher price.
The producer also has to pay for other resources such as raw materials, machinery and labor. If his or her money is short on supplying a certain number of products because of an increase in his or her input costs, supply will decrease.
A producer may produce more than one product.
However, a producer's money is limited and if they increases their supply for one product, then they would have to decrease their supply for the other product(s).
As we see more and more firms enter the market, more and more of the good in question gets produced.
So an increase in the number of firms gives us an increase in supply, while a decrease in the number of firms gives us a decrease in supply.
Surplus
Shortage
When there is not enough supply of a product that consumers want to buy.
Demand is Greater than Supply

Producer is more willing to produce a good or service than the consumers are willing to buy.
Supply is greater than Demand

Substitution effect
Diminishing Pers
onal Value
Dim
inishing Marginal Utility

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